Education Dept. Proposes Compromise on Student Loan Fraud Claim Rule

As part of ongoing negotiations to rewrite the Obama-era borrower-defense rule, the Trump administration this week proposed to change evidentiary standards for debt relief claims that would be a compromise between the positions of colleges and student advocates, Inside Higher Ed reported.

The borrower-defense rule, which aimed to clarify how students defrauded or misled by their institutions could apply to have their federal loans forgiven, was originally set to take effect last year. However, Education Secretary Betsy DeVos blocked the rule and announced a new rulemaking session to rewrite the regulation.

Earlier this year, U.S. Education Department officials issued draft plans to impose a stricter standard for when federal student loan borrowers defrauded by their colleges can have their debt forgiven. This week's proposal, released ahead of the final round of negotiations over the borrower defense to repayment rule, would require borrowers filing a loan forgiveness claim meet a "substantial weight of the evidence" standard—essentially, the borrower's claim they were defrauded, plus some form of evidence. The draft plan aims to serve as a compromise position between the tougher "clear and convincing" standard sought by college representatives and the lower "preponderance of evidence" standard pushed by student advocates, reported Inside Higher Ed.

The department's proposal would drop what amounted to a "rogue employee" exception for borrower-defense claims. However, it maintains an "intent standard" for those claims, leaving in place potentially the biggest hurdle for negotiators to reach consensus on a new rule.

The proposal also adds a three-year limit for the government to seek reimbursement from a college after it determines there is reason to approve a borrower-defense claim.

If the committee fails to reach unanimous consensus on a plan, the Education Department will be free to formally propose its own version of the regulation.


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